Mum and dad investors hit by favourable COVID-affected tenant rules: Hotspotting's Terry Ryder
Expert Observer
The standout feature of the behaviour of our politicians is the degree to which they are out of touch with their constituents and the impact of the decisions they make.
In the real estate sphere, the most startling recent example was the knee-jerk decision-making of state and territory governments in favour of pandemic-affected tenants, without any regard for the impact on the mum-and-dad households who own an investment property.
Equally, our elected representatives collectively appear oblivious to the rental shortage crisis that exists in most (not all) locations across the nation.
The situation has become dire in many parts of Australia, with queues of prospective tenants showing up at open houses and candidates offering more than the asking rent and/or offering to pay six or 12 months in advance to beat the competition.
Here’s the current situation …
According to the monthly report from SQM Research, vacancy rates in our already-tight rental markets fell in six of the capital cities and were unchanged in the other two in January.
The national average vacancy rate fell from 2.2% in December to 2% in January, but five capital cities – Perth, Adelaide, Canberra, Darwin and Hobart – all have vacancy rates below 1%, while Brisbane sits at 1.7%.
Breeze West End
Throughout regional Australia, many centres have vacancy rates below 1% in what represents a national rental crisis for people seeking tenancies. It’s common to find regional locations where the vacancy rate is closer to zero than to 1%.
Keep in mind the industry benchmark is that vacancy rates below 3% represent a shortage of rental properties. Below 1% is a dire situation.
The two biggest cities, where vacancies are highest, showed marked improvements in January, with Sydney falling from 3.6% in December to 3.2%, and Melbourne falling from 4.7% to 4.4%.
SQM CEO Louis Christopher says the figures provide more evidence the worse is over for landlords in the Sydney and Melbourne rental markets.
He says: “The falls in vacancy rates for the month in those two cities, combined with the increased tightness in other cities and regions, has now brought rental vacancy rates down to below where they were prior to the outbreak of Covid19.”
Christopher says the data, overall, suggests that 2021 will remain largely a tenant’s market in the inner-city areas of the biggest cities “but will also very much remain a landlord’s market for regional Australia”. It would add to that the smaller capital cities – as shown earlier, six of them have ultra-tight rental markets.
He also notes that rents for both houses and units have risen in the capital cities, on average, over the past month.
In annual terms, the national average is a 10% rise in house rents and a 4% increase in apartments rents.
The growth has been higher in regional markets than in the capital cities, with Sydney and Melbourne rents still lower on average than a year ago.
But there have been strong rises in Perth, Canberra and Darwin.
In Perth, rents have risen 11.5% for houses and 12.3% for apartments, while in Darwin house rents have increased 27% in 12 months. In Canberra rents have risen around 6% for both houses and units.
The repercussions are spreading well beyond the immediate participants, tenants and landlords. Businesses in regional areas are struggling to find the workers they need because people interested in taking the jobs on offer can’t find anywhere to rent in those areas.
So what are our elected representatives doing about that? Essentially, nothing. They give the impression that aren’t even aware of the problem. This situation is just not part of the national discussion.
Partly mainstream media is to blame. Our major newspapers, especially the Fairfax ones, have been focusing their coverage on the few places in the nation that have high vacancies, specifically inner-city Melbourne and inner-city Sydney and creating the impression that we have an over-supply of dwellings – which is laughable.
Federal Labor, if they had their way, would make matters worse by scrapping negative gearing, which would be a huge disincentive to investors.
What we need is the opposite – measures to encourage people to buy investment properties and make them available for rental. Rental vacancies are an outcome of the activity of investor buyers – and their absence in recent years is a chief reason we have this crisis.
HomeBuilder is helping the situation by encouraging the creation of new dwellings, but more needs to be done.
If politicians want to help tenants, they need to encourage landlords – instead of treating property investors (most of them ordinary mum-and-dad households) as a criminal class.
Terry Ryder is the founder of hotspotting.com.au
ryder@hotspotting.com.au
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